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National bank of Pakistan Acknowledgements First of all I am thankful to Almighty Allah who gave me knowledge and power to make me able to complete my internship successfully. I am also thankful to Institute of Management Sciences Bahauddin Zakariya University Multan who provide me this opportunity to have an experience in a reputed organization and groom myself for the future professional responsibilities. I shall also like to wish to acknowledge and show my deep gratitude to our respective teacher, Dr. Nauman Abbasi, for his consistence, advice and support given during the writing up of this report. I offer my heartiest tribute and cordial gratitude to present my thanks to Mr. Sohail Rasool Operation Manger of NBP Main Branch Multan and Mr. Sajid Credit Incharge of NBP Main Br. Multan for their kind support and cooperation in this project. 1 51

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Page 1: NBP internship report

National bank of Pakistan

Acknowledgements

 First of all I am thankful to Almighty Allah who gave me knowledge and

power to make me able to complete my internship successfully.

I am also thankful to Institute of Management Sciences Bahauddin Zakariya University Multan who provide me this opportunity to have an experience in a reputed organization and groom myself for the future professional responsibilities.

I shall also like to wish to acknowledge and show my deep gratitude to our respective teacher, Dr. Nauman Abbasi, for his consistence, advice and support given during the writing up of this report.

I offer my heartiest tribute and cordial gratitude to present my thanks to Mr. Sohail Rasool Operation Manger of NBP Main Branch Multan and Mr. Sajid Credit Incharge of NBP Main Br. Multan for their kind support and cooperation in this project.

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Preface

At the master level, the students, after the completion of their studies have to face a lot of difficulties and problems as they are entering a completely new phase of their lives that is the practical field in simple, due the vast difference between theoretical and practical work. To avoid such discrepancies the students of MBA are given the opportunity to not only visit various business organizations but also to work there and gain first hand experience at the process and method in which these different organizations function.

The purpose of the practical training is to increase the know how of the students regarding the virtual jobs of different business organizations of the country. It is also included in the charter of Project Report that the students go through actual systems of the management which prevail in the various business organizations. It is also necessary to enhance their managerial capabilities include and comprehensive manner in respect of various managerial opportunities.

The preparation and submission of this Project Report is essential for all the students of MBA. This Report on National Bank of Pakistan covers more or less all the aspects regarding the structural organization, working system, overall growth of the company considering the fact that the report is meant to give an overview of the National Bank of Pakistan & its major operations and strategies.

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National Bank of Pakistan

Historical Background :

The normal procedure of establishing a banking company under the Companies Law was set aside and the Bank was established through the promulgation of an Ordinance due to the crisis situation that had developed with regard to financing of jute Trade. The Bank commenced its operations from November 20, 1949 at six important jute centers in East Pakistan and directed its resources in financing of jute crop. The Bank’s Karachi and Lahore offices were subsequently opened in December 1949.

State bank of Pakistan after its formation demanded from the Indian Reserve Bank the assets against the Indian currency retired from Pakistan territory. Government of India refused to hand over the assets worth about five hundred million rupees. The dispute is still unsettled and these assets are still not delivered to Pakistan. Until June 1950, the Bank was engaged exclusively on jute operation. Thereafter, it was felt that it could expand its business to include other commodities as well. Bank took abig stride in 1952, when it replaced the Imperial Bank of India, as an agent of State Bank of Pakistan.

With the passage of time its functioning diversified as they take over the function of different institution with the passage of time like in past they took over the function of Imperial bank of India and now of NDFC (National Development Finance Corporation).

It is working as the agent of the state bank of Pakistan and performs its functions wherever state bank of Pakistan is not present. In 2004 national bank celebrated its golden jubilee during the last fifty years bank has made substantial strides in the financial services industry in Pakistan and it remains the largest financial institution in Pakistan.

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Vision "To be recognized as a leader and a brand synonymous with trust, highest standards of

service quality, international best practices and social responsibility."

Mission Statement

“ To be recognized in the market place by Institutionalizing a merit & performance

culture, Creating a powerful & distinctive brand identity, Achieving top-tier financial

performance, and Adopting & living out our values".

Goals

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"To enhance profitability and maximization of NBP share through increasing

leverage of existing customer base and diversified range of products."

DEPARTMENTS

Departments in National Bank Main Branch Multan

Following departments are working in NBP main branch:

Foreign Exchange DepositsCredit and AdvancesBills & Remittances Accounts OpeningClearing SectionGovernment SectionCorporate

"What activities I have performed and what I have learned in these departments are briefly explained below."

FOREIGN EXCHANGE DEPARTMENT:5

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Foreign exchange is an important department in bank system. In the foreign exchange department all the operations of the bank are done in the same way as in all other departments of the bank this department also involve in deposits, remittances and advances but the difference with other department that the foreign exchange department deals in foreign currency rather then in local currency. For opening of account in foreign exchange the minimum balance required is $1000.This department is just like Cash Department in local currency. In this department, the dealing is made in foreign currency.

In National Bank of Pakistan, four currency accounts are available:

US DollarPound SterlingJapanese YenEuro

FUNCTIONS:

The department performs the following functions:

Account opening Account closing Inward/outward remittance Issuance of traveler cheques

ACCOUNT OPENING:

Terms and conditions:

Account opening requires two things:

1) National ID card of the customer and introducer 2) Introducer

CUSTOMER:

Customer is the person who comes with the purpose of opening the account.INTRODUCER:

Introducer is a person having the account in same branch and gives guarantee about the customer. If the introducer is not proper than state bank charges Rs. 5000/- per head from that employee of the bank who has opened the account of the customer on the request of the introducer.

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Procedure of Account Opening and Depositing Foreign Exchange:

First of all, the customer is required to fill an application form. Then he attaches the photocopy of his identity card and fills the signatory cards. Then he is allotted an account number by entering in the account opening register. Now he fills the pay-in slip and deposits money on the counter.

Following things are needed for opening of account:

Account opening form Signature card Letter of kinship Letter of thanks Issuances of cheque book

Account opening form:

Account opening form consists of:

Category of account Currency Title of account Account number Customer information Initial deposit Authorized person in case of customer death

Signature Card:

The signature card included the name and specimen signature of the customer.

Letter of kinship:

In the latter of kinship the customer authorized the bank to pay the proceedings of his/her PLS/Current foreign currency account to the related person by describing the relationship of the person with the customer after the death of the customer.

Letter of Thanks:

Letter of thanks is the latter issued by the bank to the customer for two purposes :

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1st purpose is to say thanks to the customer for opening the account in their bank

2nd purpose is to confirm the address provided by the customer while opening the account.

Issuance of cheque Book:

Cheque book is issued to the customer after sending the letter of thanks when the customer comes with the latter of thanks and requests for the issuance of the cheque book. A cheque book (usually having 25 leaves) is issued to the customer.

Closing of Account:

The customer can close the account. The customer is required to submit an application for closing the account. The account is closed out and his balance is paid to him after deducting the closing charges, i.e. $ 20 and the application is filed in account closing file.There are many reasons for closing of account:

Account holder Owen request Death of account holder Closing of account due to the bad manners of account holder

Inward/Outward Remittances:The remittances are of following types:

Foreign Telegraphic Transfer (FTT) Foreign Demand Draft (FDD) Foreign mail transfer(FMT) SWIFT Western union money transfer(WUMT)

Foreign Telegraphic Transfer:

This is telegraphic transfer just like ordinary local currency TT, but this is foreign currency.NBP has its correspondent bank in New York. NBP gives credit to main office Karachi, which gives credit to NPB New York, which gives credit to NPB, which ultimately gives credit to required destined bank and account number.

Mode of payment can be cash or by debiting the account. When FTT is received from abroad, NBP debits Main Office Karachi account and gives credit to the account of beneficiary.

Foreign Demand Draft:

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Foreign Demand draft is also known as FDD. A person who wishes to remit money to someone in another place may if he does not send his own cheque, obtain from his bank a draft on demand payable to the person who is to be paid the money. It may be drawn upon one of the banker’s own branches, or upon some other bank where exists for draft to be drawn. Whenever a draft is drawn own advice is dispatches the same day. Advising the bank or branch as the case may be, of the particular of the draft of that banker on whom it is drawn may recognize the draft was it is presented. When a person requires a draft, he should be asked to complete the prescribed application form in which he should state the amount of the draft, the name of the payee and the place of payment. The bank charges commission Rs. 500 flat, excise duty Rs. 8. for charges.

After receipt of money, the entry is passed in FDD register and a number is allotted to FDD. Then FDD is prepared and given to the customer. After this, they give credit to Main Office Karachi, and advice is also sent to Karachi.

Foreign Mail Transfer:

These are also known as FMT. Transfer by mail of an account of currency to another country. The Remitter sign auroras requesting the banker to transfer the amount by mail, giving the name and address of the payee.  

Foreign Bills for Collection:

Under this head, all foreign cheques are included whose payments are to be received from abroad. When a customer asks the bank for collection, the cheque is sent to the bank on which is drawn. Then on the receipt of advice from abroad, the customer’s account is credited in the bank and debit the Main Office Karachi account.

Traveler Cheques:

Issuance of Traveler Cheques:

NBP issues the traveler cheques to those people who want to travel abroad. These are not drawn on any specified bank or banks, but payable at practically all banks throughout the world and guaranteed by some well-known institution. National bank purchases the traveler cheques from American Express Bank and makes the payment after selling it to the client.

Procedure:

A customer is required to submit the following things:

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Valid passport with visa Return ticket

Currency must be deposited in Pak Rupees. Ticket is endorsed. It is converted on the selling rate of that day. Traveler cheques are issued. Their limit is $50 per day for private visit and maximum limit for the year is $2100.

Limit for businessman is $200 per day and maximum limit is $6000. But approval from Chamber of Commerce & Industry is required and certificate of ticket issue for which the payment must be made through cheque. Pak rupee currency account is necessary, and he has to present cheque for the amount to the bank. Endorsement of the ticket is very essential. Issuing ticket authority should endorse its stamp on the passport.

SWIFT: The SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. 

The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances.  The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-APKKA. 

All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT.  In case of transfer of funds the introduction of S.W.I.F.T., an acronym for Society for Worldwide Inter-bank Financial Transactions, has made remittances faster and secure. The system works like Internet communication processes. All the banks in the world are registered for the service, which have the facility of online computers. Headquarter of S.W.I.F.T. is in Belgium. The message sent through this way does not require any code tests to confirm its authenticity.

The sending process is more secure where two officers make the transmission of the message, one types the content with his code word and the other executes it with his password. There are different types of codes that are used for the messages interchanged on the basis of the type of the transaction. Using the NBP network of branches, you can safely and speedily transfer money for our business and personal needs.

Swift is a soft wear. It is use for following purposes:

Financial transactions Non-financial transactions Linking Import & export messages

Different codes are used in swift for different purposes:10

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Letter of credit code is 700 Remittance code is 100 Bank to bank transaction code is 202.etc.

Procedure:

When any massage comes through swift 1st its received by head office then head office authority send that massages to different banks via mail to main branches of relative banks.

Western Union Money Transfer:

Western union money transfer is a fastest way to receive money worldwide. It is working in almost 200 countries. Different Government and private organization are dealing with WUMT.

Govt. organization e.g banksPrivate organizations e.g Zarco, Money changer, Dollar East, Master Currency.

Main office of WUMT is situated in Dubai, it is a procedure of counter payment.

Procedure of payment:

WUMT just needed identification, no need of a/c, it's a counter payment. Procedure of payment is that the customer came to specific person who is dealing with WUMT tell him the:

1) MTC NO

2) Receiver name

First name Middle name Last name

3) Sender name

First name Middle name Last name

4) Telephone no

5) Photo copy of ID card

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6) Expected amount (10% margin is acceptable)

7) Test question

After if the that related officer feed MTC # (mail transfer control) , it is unique number not less then 10 digits, receiver name , his/her 1st name and last name, and sender name to check whether amount is come or not . When all these things are correct then give a form to the receiver, he/she filled the specific form, after that officer done his signature and give one copy to customer, other copy send to the cash counter for payment and the last copy put in file for the purpose of record. Payment is made only in Pak rupees.

WUMT form:

Its form is divided into three sections:

1st for receiver information, his name, address and telephone number2nd section for sender, his name, address telephone number3rd section is for expected amount, MTC number, test question, signature.

There are three copies of form: 1st for counter payment, 2nd for customer and 3rd for branch record.

Deposits

Deposits are important to the bank as a backbone is to the body of a man. They are the lifeblood of the

bank. National Bank of Pakistan and all other commercial banks perform the function of deposit

accepting from the general public by offering suitable rates of interest on them, or on simply a promise

to repay on demand.

OPENING OF ACCOUNT BY AN INDIVIDUAL:

After entering into bank premises the person goes through the following steps for opening an account in

the bank and for becoming a bank customer.

1. An Introduction:

The first important step to take place in bank is to get satisfactory introduction of the person,

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who wants to become bank’s customer.

In N.B.P (Main Br. Multan) the account opening officer takes great care of this step and gets

introduced with the person himself. His main intention is to determine the prospective

customer’s integrity, respectability, occupation, why he opening account in this branch and

nature of business he is doing at the time of opening an account.

2. Account Opening Form and Specimen Signature Card:

Now the person is provided with an application form known as Account Opening Form.

This form contains: -

i. Title of account.

ii. Nature of account.

iii. Address.

iv. I.D. Card number.

v. Telephone No. (Office and Residence)

vi. Signatures of the applicant.

vii. Amount deposited.

viii. Mother's full name.

ix. Profession.

x. Name of next of Kin.

xi. A Nadra verification is also attached with this form. NBP is online connected with

Nadra office to verify the National Identity Card.

The customer will attach a copy of his and next of kin National Identity Card with the form.

Specimen Signature Card:

Specimen of signatures will be obtained from depositor at the time of opening his account. A specially

designed card is used for this purpose; the card must be countersigned by an official of the bank not

below the rank of an officer.

3. Account Opening Register:

Now the name of the customer will be recorded in account opening register, and from here the

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account no. of the customer will be written on (top most corners) account opening form and on

specimen signature card.

4. Issuance of Cheque Book:

The cheque book will ordinarily be issued to all customers desiring to have chequing facility.

Cheque book consists of 10, 25, 50, or 100 leaves depending upon customer requirement.

Customer can withdraw money by signing a cheque.

A special cheque book register is kept to enter the name of the person having cheque book.

After submission of account opening form, this form will be punch in computer and a letter of

thanks will be issued in the address of account holder and will be sent by post. This letter is

issued to confirm the address of account holder. On receiving of letter, account holder come

with letter then his first cheque book is issued. For next cheque book there is normal procedure.

6. Recording into General Ledger:

The concerned officer records the name and amount deposited with the bank in to general

ledger. Separate ledgers are maintained for different types of accounts e.g.

Current Account Ledger

Saving Account Ledger

Fixed Deposit Account Ledger

As and when customer will deposit the money, amount will be credited in general ledger and

the withdrawal will be followed by a debit entry in the ledger.

TYPES OF ACCOUNTS MAINTAINED BY NATIONAL BANK OF PAKISTAN

NATIONAL BANK OF PAKISTAN maintain following types of accounts:

1. Current accounts.

2. Profit and loss sharing account.

3. Fixed deposit account.

CURRENT ACCOUNT

This account is also known as running balance account. Simply we can say “A bank account which may

be used to lodge payments or to withdraw money on demand.”

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Its main purpose is to serve the businessman. Form number F-53 is provided to the person to open the

account. It is a statutory requirement to maintain current account.

Its main features are: -

Minimum amount for opening this account is Rs.500

Any person can open the account with the bank

According to inter banks agreement interest is not paid on current account and zakat will not be

deducted on this account.

Bank act as custodian of money

Over draft facility is provided to the customers

Customer can withdraw money through cheque supplied by bank

PROFIT AND LOSS SHARING ACCOUNT

In general it is also called saving account .To provide interest free banking facilities in Pakistan, this type

of account was introduced in January 1982 after the Islamization of banking.

The main features of this account are: -

Instead of having fixed return in the form of interest the deposited money will be shared in profit

and loss of the bank.

One can open the account by depositing minimum Rs.100

Charges free withdrawal is for Rs. 25000 in a day. 3% service charges will be deducted on the

excusive amount.

There is not any kind of interest is provided on money deposited.

Rate of profit is declared at the close of each half-year.

Main difference between current and profit & loss account is that interest is paid

and zakat is deducted on profit & loss account but in current interest is not paid

and zakat is deducted.

CREDIT AND DVACNECS DEPARTMENT

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Credit:

The most important activity of the bank is the granting of credit to the customers.

NBP provides short term and long terms financing for domestic and international

trade. The policies made by central office of the cash can be amended on the basis of

the rules and regulation, economic risk of each country, board of directors and

committee of the NBP made this type of decisions and informed about these decisions

to the branch managers.

Manager can grant the credit limit to each customer with in the declared limits

approved by the controlling offices. Banks grant credit to the customer for a certain

period of time. The banks provided credit to the customers so that they can purchase

ahead of their liability. By giving these facility to the customer’s large scale

production of commodity can be achieved and economic growth rate can be

increased. The power to sanctioned loans had been delegated for controlling different

offices, according to amount of loan.  This department is also called as risk

management group.

The following elements are used for credit selection:

Character:

It is based on the borrower willingness to repay the obligation. The loan officer sees

the family background mode of living, business nature, habits, moral reputation and

etc. before giving the loan.  

Capacity:

The ability of borrower to repay the loan when its due. The borrower ability to

repay the loan is assessed by the office so that he will be able to repay the loan in

future.

Functions Capital:

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The officer assesses the capital of the borrower. If assets held by the borrower

are liquid, they can be easily convertible in cash; but if non liquid is used then it is

risky to given loan.  

Collateral:

It is collateral security. It may consists of stocks bonds , bill of exchange, bills

of lading, etc. the bank has protect him self from any discrepancy in the future. They

increase the ability of the borrower to obtain the funds from the bank.  

Condition:

The economic condition of the borrower is determined. The economic

conditions of the borrower in and out side the country effects the repayment of loan. If

condition is favorable then loan is given otherwise vice versa.  

Loans:

Loans provided by the bank are of the following two types.

Funded

Non-funded

Funded:

In fund based bank contributes a large amount of the fund based on clarified as

follows

Types of Loans: Demand finance Cash finance Running finance

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Demand Finance

One time disbursement of the whole amount sanctioned, as the limit for the

credit allows. Any person, individual, group, company, firm and all others can

achieve this mode of financing. The mark-up or interest is calculated on the total

amount disbursed and requires to be paid before the date of final adjustment.

Regarding the amount, limit and period, it depends on the nature of the case in review.

For example gold loan.

Gold loanThis loan is sanction against the security of gold.

Documentation:

BBFS ( borrower's basic fact sheet):

All details of the borrower's like borrower's profile , references, nature of

business/profession, existing limits and status, requested limits, details of payment

schedule etc…

LAF

Application for finance against pledge of gold ornaments. In this document

introduction and verification of the borrower, terms and conditions of the loan and

markup rate is written. This loan is for one year and there is only one installment at

the end of year.

Completion of pre-disbursement formalities of DF(Gold)

Finance facility offer letter:

This is sanction letter of loan given by authorized authority.

Certificate of valuation of Gold ornaments:

This valuation is by schroff, who is contracted with NBP.

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Delivery letter :

Undertaken ofborrower that I have delivered my gold to the bank.

Confirmation certificate:

It is the confirmation by schroff about the weight and value of gold.

Delivery of pledged property:

Gold loan insurance form

CNIC verification

Consumer credit information report:

This is the information of others loan taken by the borrower form other financial

institutions which is send by the state bank on request of NBP.

Promissory note:

Agreement for financing for short/medium/long term loan markup basis:

This agreement is signed by both parties (bank and borrower)

Letter of pledge :

Guarantee:

This is the guarantee that if in case gold does not recover the amount of loan then

bank can legal action to sale out other property to recover the loan with the

permeation of court.

After this documentation borrower has to pay stamp duty,

withholding tax and insurance fee. Then credit department will make entry in manual

book of account and give them debit voucher which just like a cheque . They will

cash that on that day and payment will be maid through NBP general account.

Cash finance

In this mode of financing the borrower is allowed to make withdrawals of

funds as he requires, but the total amount outstanding cannot exceed the limit

sanctioned. The mark-up/interest is calculated on the amount outstanding on his

account. The calculation of mark-up/interest is based on the number of days a specific

amount is withdrawn. This loan is given against the hypothecation of stock. It means 19

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lien on the stock is of bank but the custody of stock in the hand of customer. This type

of loan is called small and median enterprise loan (SME). This type of loan can be

issued up to 100M.

Loan account:

In this account bank will credit the amount of loan and the

borrower can get the cash from this account but after using this loan when he receive

the profit on sale proceed of business he must have to deposit in this account and cash

receipt must show to credit department where they enter this in the books of record.

Maximum no. of transactions will show the max. credibility of the business. If there is

low or no transaction is these account this will show the low credibility and less

business activity and in any audit objection can arise on this loan. Then the bank will

check the business and find out the reason of low transaction.

Markup account:

In this account the borrower will submit the markup according to the agreement. If it

on quarterly basis or half yearly he will have to pay on the specified date. Markup will

be take on the amount that the borrower have taken form the loan account. It will not

be taken on the whole sanction loan. Markup will be set on daily basis.

Documentation:1. BBFS ( borrower's basic fact sheet):

All details of the borrower's about his business, nature of business, business

operations, business management, corporate status, details of directors & owners,

loans taken from others banks, balance sheet, income statement etc…

2. LAF (loan application form)

3. CIB (Credit information beuro) Report:

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This is the information of others loan taken by the borrower form other

financial institutions which is send by the state bank on request of NBP.

4. ICIL ( international credit information limited)

This is a local credit report in which detail information about the market

situation, credibility of the borrower and other information regarding the business

stability and worthiness of borrower.

5. Title Clearance:

It is a legal opinion on the document of pledge property (given by borrower)

by the legal adviser of bank before pledged.

6. Latest balance sheet:

Latest balance sheet of the borrowers business.

7. Markup recovered :

This is for the borrowers who want to revise their loan. First,

they must have to pay their previous markup then they can apply for the revision.

8. Last audit/ report:

If audit report object any case or any document then credit

department have to give satisfactory reply and attach the relating document the case.

9. Valuation report:

Valuation report of the property. This valuation is done by the

third party. This gives us the clear fore sale value.

10. BM (Branch manager) certificate on acceptance of valuation report.

11. Compliance certificate :

This document is attached at the end of documentation. It is a

legal opinion on all documents present in the case by the legal advisor of NBP.

12. Fard/PT-1

Showing bank's charge/lien on the mortgage property.

13. Documents completion certificate form BLA

14. Stock statements Physical verification of hypothecated stocks.

15. Business premises :

Means the business premises is on lease or on the name of

businessman.

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16. CNIC

Risk rating:

On the bases of this documentation credit department make

judgment about the risk of loan. If maximum score is above 60 then the loan will be

recommended for sanction. Means if in the light of these documentation credit

department think that there loan is 61 % secure then they will recommend.

Maximum score Rating

61-70 4

71-80 3

81-90 2

91-100 1

Staff loanEmployees of NBP can also take three type of loan. Employees have advantage of

low interest rate of only 4%. Employees can avail the following loan facalities.

Motor Car/ Cycle finance

Computer finance

House building

Documentation: Standard application form

Approved building plan (in case of building)

Employee profile form

CNIC

Driving license (in case of motor finance)

Seller Quotation

Statement of outstanding loans

Salary slip

Non-involvement certificate22

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IB-12 Demand Promissory note

IB-16 Agreement for finance

Mortgage Deed IB-22

Letter of hypothecation (in case of motor car)

Authority letter for recovery of legal and other charges

Running Finance/ Corporate Finance:

To assist a large-scale business operator to carry on his day to day requirements of

liquid funds, this account is opened is made operation in his favor. Running finance is

provided where the amount goes beyond 100M. The mark-up/interest is calculated the

same way as in case of cash finance.

Security against running finance is that which is easily convertible in to cash.

Non-Fund:

Bank provide non fund advance in form of Guarantee.

Guarantee:

A guarantee is a promise between one person to another person or party to

answerable for the debt of a third party. Bank issues guarantee after 100%cash

collaterals are provided by the person.

Advances

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Advances are small loan or we called retail product of loan. These loans can be

sanction up to limit of 75M. This financing is maintained or operated through a

software CAMS (consumer asset management system). In this branch two retail

products are available.

Advance salary

House building finance (SAIBAN)

We can also say it consumer financing.

NBP Advance salary:This facility of available for Federal Govt. employees, provincial Govt. employees,

Autonomous Bodies (whose salary is giver through NBP) Local Bodies employees

and Semi Govt. intuitions employees. Debt burden is 50:50 means if his installment

(which is set through a computer programmed formula) is exceeds his half take home

salary, and then he can not get the loan. The maximum no. of installments is of 60

months.

Documentation: Three months salary slips of employee

CNIC of employee

Two references of work colleagues. One reference form same grade (1-CNIC

1-salary slip). Second reference is from officer grade (1-CINC, 1-salary slip).

Three blank cheques signed by employer.

Employer undertaking (SDO, DDO) employer will give undertaking that if

any changes in salary payment account, transfer of employee, retirement of

employee, death of employee or any other changes related to the mode of

payment of salary of employee, he will inform the bank immediately.

LAF (loan application form).

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Remittances Transfer services from one bank to other bank through different instruments.

Modes of remittance/ instrument of remittance

Mail transfer (MT)

Telegraphic transfer (TT)

Demand draft (DD)

Govt. Draft (GD)

Electronic transfer (ET)

Payment order

Telegraphic Transfer:

In TT, a person fill TT application form and pay the transfer

amount and service charges at cash counter. Then he will submit this form in

remittance. At first stage, this will enter in the book keeping records then a specific

coded message is prepared by remittance officer. After that remittance officer send

this coded message through telephone to the receiver bank. On the other hand the

receiving officer decodes the message and detail and then credit the account which is

mention in the coded message. After sending the message telephonically, form will be

the given to the computer operator. He will punch all the TT's in computer. At the day

end balance of the book keeper, casher and computer operator should be matched.

After that the bank will send a TT confirmation F-125 (To confirm that balance is

correctly credited to the corresponding account). In response of this confirmation they

will send TT confirmation F-128.

Mail Transfer:MT may be online or off line. In MT, a person fill MT

application form and pay the transfer amount and service charges at cash counter.

Then he will submit this form in remittance. This will enter in the book keeping

records then remittance officer prepare a draft in the name of specified person which

mention in the form. Then, if it is off line it will be send through mail or corer

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services. If it is online then a message will be sent through fax to the receiving bank

and at end of day send authority will send a MT confirmation to that bank.

Demand Draft: It is an instrument, which is payable on demand and it is only presentable in

the city/country. When any draft, i.e., an order to pay money, drawn by an office of

bank upon another office of the same bank for a sum of money payable to order on

demand, purports to be issued by or on behalf of the payee, the bank is discharged by

the payment in due course.

When a person requires a draft, he should be asked to complete the prescribed

application form in which he should state the amount of the draft, the name of the

payee, and the place of payment. The bank charges 3% withholding tax and

commission. In DD, a person fill DD application form and pay the transfer amount

and service charges at cash counter. Then he will submit this form in remittance. This

will enter in the book keeping records then remittance officer prepare a demand draft

and give to the customer.

Pay Order:

It is an instrument, which is payable in demand and only presentable in city.

Pay order is also called the banker’s cheque drawn upon the issuing bank itself.

It is not negotiable and therefore, bankers tend to cross the instrument “Payee’s

account only” to avoid the possibility of dealing with instruments with forged

endorsement. The pay order is issued favoring individuals, commercial concerns, and

government departments. On the presentation of pay order, the bank is liable to pay

the amount to the customer. Bank charges excise duty and service charges. Procedure

of preparation of pay order is same as of others instruments.

Govt. Draft:

Govt. draft and demand draft are almost same the only difference is, it can only be

issued and drawn on Govt. institutions.

Electronic Transfer (ET):

In electronic transfer a message of money transfer is send through virtual private

network. Procedure similar to the procedure of TT.

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CLEARING

Meaning of Clearing:

The word clearing has been derived from the word “Clear” and is defined as “a system by which banks

exchange cheques and other negotiable instruments draw on each other within a specified area and thereby

secure payment for their client through the clearing house at specified time” in an efficient way.

Advantages of Clearing:

1. Since clearing does not involve any cash etc and the entire transaction take place through

book entries, the number of transactions can be unlimited.

2. No cash is needed as such the risks of robbery, embezzlements and pilferage is totally

eliminated.

3. As major payments are made through clearing, the banks can manage cash payment at the

counters with a minimum amount of cash in vaults.

4. A lot of time, cost and labor are saved.

5. Since it provides an extra service to the customers of banks without any service charger

or costs, more and more people are inclined and attracted towards banking.

NIFT:NIFT stands for National Institutional facilitation Technologies. Clearing House

of SBP has shifted a tiresome part of its work to a private institution named NIFT.

NIFT collects cheques, demand drafts, Pat orders, Travelers Cheques, etc. from all

the branches of different banks within city through its carriers and send them to

the branches on which these are drawn for clearing. After the branches approve

the instruments drawn on them, NIFT prepares a sheet for each branch showing

the number for instruments and amount in its favor and drawn on it and sends it to

each branch. A similar sheet for each bank is also sent to clearing house of SBP

where accounts of banks are settled in the same manner.

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The instruments are collected from the client. Following things are checked.

Cheque date (a cheque is valid for six months and it should not be post

dated).

Title

Amount in figures and words should be same

There should be no cutting and overwriting on the cheque.

Deposit should also match with the cheque.

Stamping Procedure:In stamping procedure, the following three stamps are used.

If the cheques is for the same bank, and drawer and the payee both have the account

in the same bank, the simple bank stamp is used, and this stamp indicates the transfer

of cheques from one account to another account. This cheque is directly moves

towards posting in computer terminal where the computer operator debit one account

and credit the account of another party. This stamp is known as the Transfer stamp.

If the cheques are received from other bank and drawer’s account is not in the bank

then cheques received stamp is used. This cheque is represented in the clearing house,

date is also mentioned on the stamp.

If the cheques is from out of the city then it is send for the collection.

Stamping On Cheques:After receiving the cheques and issuance of the deposit slips to the client, stamping

process starts on the cheques, the following stamps can be used.

a) The name and branch name of the bank stamp is used on the front side of

the cheques. This stamp is used on all types of cheques. This stamp is

known as crossing stamp.

b) The second stamp used is the clearing stamp on the front side of the

cheques. It also indicates the presenting date of the cheques. If the cheques

is dishonored and deposited again for clearing, the clearing stamp is used

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again with new date of presenting. So the clearing stamp is necessary

wherever the cheques are presented for clearing.

c) The third necessary stamp which is the endorsement indicates the paying

bank to “payees account credited”. It is the confirmation of outward

clearing.

The whole clearing process requires about 2 days, after 2 days the customers’ account

is credited and the customer can make the transactions.

Procedure of clearing:

Presume that NBP got the cheques which are drawn on HBL, UBL and MCB for amounts Rs. 50,000/-, Rs.

15,000/- respectively, its total being amounts Rs.95,000/-, it means that this amount is to be credited to NBP

general A/C with S.B.P. on the other hand the cheques drawn on NBP are from HBL, UBL and MCB of

Rs.15,000/-, Rs.75,000/- and Rs.30,000/- respectively, its total being Rs.1,20,000/-, it means that this amount is

to be debited from NBP general account. The difference between Rs.95,000/- credit and debit Rs.1,20,000/-

debit is Rs.25,000/- debit which means the NBP general account will be debited for Rs.25,000/-.

If we separately show it as

1. NBP has t receive Rs.50,000/- from HBL and to pay Rs.15,000/- to HBL so difference is

Rs.35,000/- credit.

2. NBP has to receive Rs.30,000/- from UBL and to pay Rs.75,000/- to UBL so difference is

Rs.45,000/- debit.

3. NBP has to receive from MCB Rs.15,000/- and to pay Rs.30,000/- to MCB so difference

is Rs.15,000/- debit.

GRAND TOTAL:

35000-45000-15000 = -25000

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i.e. Rs.25000 debit.

Hence NBP general A/C with State Bank of Pakistan will be debited with Rs.25,000/- and the contra will be

other banks accounts respectively. This called as “Debit and Credit Rule”.

Outward Clearing at the Branch:

The following points are to be taken into consideration while an instrument is accepted at the counter to be

presented in outward clearing:

1. The name of the branch appears on its face where it is drawn on

2. It should not be stale or post dated or without date

3. Amount in words and figures does not differ

4. Signature of the drawer appears on the face of instrument

5. Instruments is not mutilated

6. There should be no material alteration if so, it should be properly authenticated

7. If order instrument, suitably endorsed and last endorsee’s account being credited

8. Endorsement is in accordance with the crossings if any

9. The amount of the instrument is same as mentioned on the paying-in-slip and fanfold.

10. The title of account on the paying-in-slip is that of payee or endorsee (with the exception

of bearer cheque).

If an instrument is in order then out bank’s special crossing stamp is affixed across the face of the

instrument. The instrument is suitably discharged, where a bearer cheque does not required any

discharge and also an instrument in favor of a bank need not be discharged. The instrument along with

paying-in-slip is retained while the deposit receipt is given to the customer duly signed. Then the

following steps are to be taken:-

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1. The particulars of the instruments and the pay-in-slip or credit vouchers are

entered in the Outward Clearing Register.

2. Serial number is given to each voucher

3. The register is balanced.

Inward Clearing of the Branch:

1. The particulars of the instruments are compared with the list

2. The instruments are detached and sort out department wise

3. The entry is made in the Inward Clearing Register (serial number, instrument number,

account number, amount of the instrument is written).

4. The instruments are sent to the respective departments against acknowledgement in the

Inward Clearing Register.

5. The instruments are scrutinized in each respect before honoring the same

Govt. SectionCollection of all Govt. revenues and payments in shape of pension and assignment

account. (Govt. expense paid by NBP.)

Provincial account (P1):

1. Miscellaneous

2. Property tax

3. Motor vehicles

4. P D (refundable amount)

5. Revenue (Water tax)

6. Traffic Chelan

7. Stamp duty

8. Agricultural tax

District Govt.

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Provincial Govt. (P2):

Food department

Central Govt. (C1):

1. Domicile (all the other miscellaneous)

2. Visa protection

3. Weapon license

4. Passport fee

F.B.R:

1. Income tax

2. Sales tax

3. Federal excise duty

4. Custom

SWOT ANALYSIS

STRENGTHS:

NBP one of the largest financial institutions of Pakistan with eight million of customer base NBP holds 24.6% share of time and demand deposits in the country. Local currency deposits comprise 67% of bank's total deposits while foreign currency deposits account for the rest.

NBP has an extensive domestic branch network of 1200 (according to the latest data) branches located all over Pakistan. The Bank also has a presence in 19 international locations including the USA, United Kingdom, Europe and the Far East.

NBP's total assets stood at Pak Rs.370 billion on December 2000. This included total earning assets of about Pak Rs.268 billion with gross loan portfolio of Pak Rs.140 billion. The bank also has an investment portfolio of Pak Rs.91 billion, which comprises treasury securities, corporate bonds, shares and other securities.

NBP cash provision as percentage of non performing loans equal to 60% this coverage factor for the non performing loans is the highest amongst the nationalized commercial bank.

NBP is working as right arm government of Pakistan as it is responsible for all claims of government for recovery as well as payment. All depositor of NBP are in relief that their money security is guaranteed by government of Pakistan.

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It acts as an agent of the Central Bank wherever the State Bank does not have its own Branch.

WEAKNESSES:

NBP staff especially at lower considers their work as burden. They usually waste time in other task a part in performing their duty. Using government property for there own need. They are reluctant to accept change brought by latest restructuring efforts.

The general out look and interior layout of branches are not as required according to modern banking

NBP bearing up large burden in running those branches, which are not producing any income but keep on adding expenditure.

NBP is relying on its traditional sources of income it has not taken benefit from innovation in banking like introducing retail banking or consumer banking and using any type of scheme to generate more deposits and producing more advances. Further, more don’t even continue its credit card due mismanagement and lack of control.

NBP is far behind in offering modern banking facility like automated teller machines then other commercial bank in Pakistan as only eighteen branches in all over country have this facility.

NBP has only forty-four on line branches. While from remaining branches data gathering is time consuming, and not fool proof. Quantum of settlement within different branches is pending because of this updating daily record is becoming very difficult.

Customers have to fallow long lengthy procedure for opening of account as well applying for debt. Which discourage most of the people to invest in NBP.

In NBP, most of the time merit not has importance in hiring of employees. Such practices are black spot on the face of bank and resulted big losses and fraudulent acts by NBP own employees.

OPPORTUNITIES:

Reorganizing efforts going on in the NBP has open many opportunities for NBP to grow. NBP current management has boarder vision. They have taken steps to improve customer services, streamline internal procedure and creating a delectating climate for technology initiative.

To achieve above mention objective they have created operation group: Starting of the retail banking initial working. Setting of target for of

making at least 300 branches country wide on line.

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Closing of all those branches, which are burden on NBP. Management to offer specialized services to major corporate including advisory and debt syndication introduces the concept of relationship manager.

Comprehensive training programs has been develop to up grade the core banking skills of the existing staff as well as integrate high quality hiring.

To improve the motivation of staff a merit-based culture is being promoted. Through overhauling the manpower recruitment preservation and performance appraisal system.

These actions taken by current management provide a great opportunity for NBP for making it future prosper and can make NBP not less than any modern commercialize bank in Pakistan.

THREATS:

Major threats NBP facing is from its competitor especially from denationalized commercial bank. In which MCB is on the top of the list, The Bank provides 24 hour banking convenience with the largest ATM network in Pakistan covering 15 cities with over 100 ATM locations.

Retail banking and consumer banking resulting in the products such as credit cards, housing finance and automobile finance lending to small individual consumers, and purchases of automobiles, housing, and consumer goods are generally made on a cash basis. These are causing another threat, if not counter will result in significance loss of customers

Recently banks and other financial institutions have introduced innovative schemes to attract deposits, like gift checque scheme by MCB. These schemes offer prizes on short and long term fixed deposits, through lucky draws.

Now banks are using technology which covers the distance no matter how far away any one, through a satellite based, on-line real-time banking system and by offering telephone banking, electronic funds transfer, E-Banking and other modern facilities.

SUGGESTIONS:

NBP major fault is that wasn’t keeping its pace with on going changing in banking industry unlike other bank. Now this bank combining all it power and trying to approach other banks.

Latest reorganizing efforts are necessary to make it cost effective also making its facility accordingly to modern banking. These must continue.

Bank management has to put its all effort to change the prevailing culture of the bank and to put the foundation stone of business oriented culture. In which employees give important to the bank and its customer.

To attract the customer in the future NBP have to make extensive effort to give facilities of retail and consumer banking. Plus the technology in the banking which will be necessary for future banking is another week area need to be stressed.

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The outlook and interior lay out of the branches is another thing which needs to be improved.

The procedure of taking services from the bank must be made easier and straight forward not involving long difficult procedure for simple task.

To remain in the market bank need to be vigilant in the eyes of customer. One way is through promotion efforts, so that people aware about he services of the banking and any addition which the bank as made in the portfolio of its services.

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